Is Apple Working on a Cheaper iPhone 4?

Apple (NASDAQ:AAPL) has reportedly begun production on a lower-priced iPhone 4 with a smaller 8 gigabyte flash drive. While Apple hasn’t yet made the information public, two sources with knowledge of the matter say that the flash drive for the cheaper iPhone is being manufactured by a Korean company. Apple usually sources its flash drives from Japan’s Toshiba and South Korea’s Samsung Electronics.

A cheaper iPhone has been long rumored, and many think it would help Apple broaden its share of the smartphone market, especially in emerging markets. But Yuanta Securities analyst Bonnie Chang says, “I think for an 8GB iPhone 4 the price is hard to go below $200, so Apple will still need a completely new phone with low specifications for the emerging markets.”

One of the sources of this information also commented on the next-generation iPhone 5, confirming rumors that it would be released this fall, around the end of September. But many are calling it the iPhone 4S because it is in many ways identical to the iPhone 4, but with a few upgrades, notably a bigger touch screen, better antenna, and an 8-megapixel camera.

Manufacturers of the iPhone 5 have been told to prepare production capacity for up to 45 units. Apple sold 20.34 million iPhones in the second quarter of this year, beating expectations of 17 million or 18 million. The company is looking to expand into Asian markets to further grow that number.

In July, COO Tim Cook spoke particularly of expanding into Greater China. During the last quarter, Asia-Pacific revenue more than tripled, with Greater China the biggest contributor, bringing in $6.3 billion and helping Apple’s revenue to climb 82% for the quarter to $28.6 billion.